Does the Federal Circuit Give Enough Deference?

The attorneys for 800 Adapt, Inc. have recently filed a Petition for a Writ of Certiorari review of 800 Adapt, Inc. v. Murex Sec. Ltd., 539 F.3d 1354 (Fed. Cir. 2008) claiming that the Federal Circuit does not provide enough deference to district courts on claim construction and they should. According to Stephen Milbrath and David Magana of Orlando based Allen Dyer Doppelt Milbrath & Gilchrist, “the Adapt case presents several important patent law issues that are of particular importance to the general public.”  In the Statement of the Case in the Petition for Cert. Milbrath gets to the heart of the matter, which is the Federal Circuit’s willingness to review everything de novo.  He says:

This case also presents an opportunity to correct a related dysfunction: the proclivity of the Federal Circuit to use its review powers, even outside of the context of claim construction, to reexamine the facts rather than to review the record for legal sufficiency in conformity with this Court’s precedent.

Counsel for Adept provided us with the following summary of the issues to be presented to the United States Supreme Court:

1) Whether the Federal Circuit’s de novo standard of review fails to pay proper deference to district court claim constructions, particularly those that make factual inferences from expert testimony developed either during trial or Markman hearings, or both, and thus warrant “clear error” treatment under Fed. R. Civ. P. 52;

2) Whether the Federal Circuit’s “patent preemption” standard for testing state-law claims arising out of “sham” assertions of invalid or non-infringed patents incorrectly employs a clear and convincing evidence standard of proof; and

3) Whether the Federal Circuit has applied an improper standard for evaluating the legal sufficiency of the evidence under Rule 50, Fed. R. Civ. P., for “patent preemption” cases — a standard that effectively entails the substitution of the court’s judgment for that of the jury, even where the jury finds liability by clear and convincing evidence.

Counsel for 800 Adept contends that the de novo standard of review applied by the Federal Circuit to claim construction issues is improper. More specifically, 800 Adept contends that the Federal Circuit does not accord enough deference to the trial court Markman orders, which may be evident by the high reversal rate of Markman orders at the Federal Circuit. Patent litigators will agree that Markman hearings involve a great deal of resources to prepare for, generally take a significant amount of time and involve a great deal of discovery. 800 Adept counsel believes that the Federal Circuit’s de novo review amounts to a cursory high-level review that often supplants the first-hand fact-finding and credibility determinations made by the trial court judge.

The Adept case does present an opportunity for the Supreme Court to determine the scope of review of patent claim construction. The patents at issue involve telephone call routing technology that automatically connects 1-800 callers to the closest local franchise of the 1-800 dealer. At trial, the jury found that Targus had infringed 800 Adept’s patents. On appeal, the Federal Circuit adopted a de novo claim construction interpretation that had not been advocated by either side at the Markman hearing or at trial. 800 Adept contends that this de novo claim construction was at odds with the plain meaning of the claims. At trial, 800 Adept presented expert testimony noting that one of ordinary skill in the art would understand that the 800 Adept patent disclosed procedures to determine the location of a mobile telephone user. The court found that the claims directed to determining the location of a mobile telephone user were not enabled.

It appears that one of the biggest problems with this finding is that the issue of enablement was not raised by Targus. The Federal Circuit seems to have taken on the burden of interpreting the claims de novo and reinterpreting the facts of the case to arrive at this conclusion. Of course, this begs the question, is the Federal Circuit applying the correct standard of review in claim interpretation matters?  Many patent litigators would love for the Supreme Court to take up this issue and set the record straight once and for all.

With respect to the state court claims, counsel for 800 Adept noted the following:

The Federal Circuit panel found that the Patent Act preempted a jury finding that Targus had tortiously interfered with 800 Adept’s business relationships based on Targus’ bad faith assertion of invalid patents against all of 800 Adept’s major telephone routing customers. The Federal Circuit panel reweighed the evidence and determined, as if it were the jury, that Targus “reasonably believed” 800 Adept’s customers infringed. The panel conveniently ignored objective evidence that the patents were invalid and, in one case, not even owned by Targus. The panel also ignored evidence that Targus had filed a sham lawsuit against a friendly routing partner to invoke an indemnification clause on the part of one of 800 Adept’s customers to collusively pressure the customer into switching to Targus.

Time will tell whether the Supreme Court will accept this case, but over the past few years the Court has shown increased willingness to address patent matters.  We will follow this case and provide updates as we receive them.

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About the Author

Mark is a partner with Zies Widerman & Malek and focuses his practice on representing clients before the United States Patent and Trademark Office and counseling inventors and businesses on various intellectual property strategies and licensing. Mark is a member of the Florida Bar (2002), and is amitted to practice in the United States Patent and Trademark Office (2000), the United States District Court for the Middle District of Florida (2002), the United States Court of Appeals, Federal Circuit (2004) the District of Columbia Bar (2005) and the United States Court of Appeals, 11th Circuit (2005).